Retailer Targets £3bn Savings Through Direct Sourcing Overhaul
By Procurement Desk · 07 November 2026
Major grocery retailer Kroger is pivoting to a direct sourcing model to cut $4bn in costs, aiming to increase direct procurement from 1% to 10% by 2029.
A significant shift in procurement strategy has been unveiled as Kroger targets $4bn (#3.1bn) in annual savings by 2029. Central to this plan is a move towards direct sourcing, with the organisation aiming to bypass intermediaries to gain better visibility over costs and supply chain resilience.
The retailer identified that roughly half of its total savings target—approximately $2bn—will come specifically from reducing the cost of goods. Currently, less than 1% of the company’s inventory is sourced directly from producers; the new strategy aims to increase this figure to over 10% within the next three years.
To facilitate this transition, the company is investing in international sourcing hubs in Asia and South America, alongside a dedicated import distribution model. This infrastructure is designed to remove third-party margins and foster closer relationships with growers and manufacturers, particularly in fresh produce categories.
For UK procurement and supply chain managers, this move highlights a growing global trend toward vertical integration and the elimination of 'middle-man' distribution layers. By leveraging data and AI to manage these direct relationships, buyers can achieve tighter margin control and more robust contingency planning in volatile markets.
Source: Procurement Magazine